October 26, 2008

Rethinking Retirement: The Consequences of Increased Longevity and Financial Uncertainty

For many people in this country, the promise of a relaxing and carefree retirement is as much a part of the American dream as the decades spent working for paychecks and climbing career ladders. Unfortunately, this dream is turning into more of a fantasy for many who planned to walk out of the office door and never look back upon reaching age 65. The reality of previously held unrealistic expectations regarding retirement, compounded with the increasingly dismal economic crisis, have forced American workers across the pay scale to acknowledge that retirement may have to wait. Even if the economy was good, which it clearly is not, a retirement age of 65 is simply not practical. While some may feel it unfair to be told to put a few extra years in, the retirement age should be extended, if not at the policy level then at least at the personal level for now. This decision is now all but required for the present and future financial security for aging individuals.

Although some companies offer employees pension plans in one form or another, a major source of income for many retired Americans is government-operated Social Security. Frantic projections that Social Security funds are to run out any second and explicit reform plans from Congress members and interest groups aside, one thing is certain: while demographics have undergone immense changes in the proportions of older individuals to the rest of the American population in the years since Social Security was first conceived, evolution of the program itself has failed to keep pace with the society in which it operates. The Social Security Act was passed by President Roosevelt in 1935 in response to the unemployment rates brought on by the Great Depression. The Act allowed retired workers aged 65 and older to collect annual wages from the federal government. At the time, life expectancy at birth in the United States was 61.7 years, a full 3.3 years less than the retirement age! This means that more than half of the people born in 1935 were not even expected to reach retirement age, let alone be eligible to collect Social Security. In 2004, as shown by the graph at the right (along with projections through 2050), U.S. life expectancy at birth was 77.9. The retirement age, however? Still 65. In fact, workers are now able to begin receiving Social Security benefits at age 62, albeit at a reduced rate. Additionally, the life expectancy at age 65 (the number of additional years an individual can expect to live upon reaching the age of 65) has increased as well, so qualifying retirees can expect to collect benefits for longer than they did when the Act was originally conceived. In other words, there are not only more individuals collecting benefits (there were a total of 35.9 million adults age 65 or over in 2000, up from 7.8 million in 1935), but also collecting for longer. A simple look at the numbers and it is easy to see why Social Security has become such a problem for this nation.

Unfortunately, the current economic climate not only increases the necessity of delaying retirement but also makes the directive of merely telling working adults to stay behind the desk for a couple of extra years a little more complicated as well. A recent New York Times article details the declines in millions of 401(k) plans as a result of the plunging stock market, as well as the increasing amount of individuals who are not currently able to contribute to such retirement funds in the wake of rising mortgages and energy prices. Among boomers, "20 percent said they had stopped contributing to retirement plans, 34 percent said they were thinking of delaying retirement and 27 percent acknowledged problems paying rent and mortgages." Article author Steven Greenhouse also features several individuals who are now preparing to retire as many as ten years later than they had originally planned. Nicolette Toussaint, age 57 and an associate vice president for communications at Alliant International University in San Francisco, is one of those reconsidering her future. "'I sort of assumed that I would probably retire around 68," Toussaint is quoted as saying. "But with what's happened recently, I'm thinking I might work until 75 or 77, so long as I'm healthy." An AARP feature additionally mirrors the growing concern about the economy's impact on individual retirement plans, providing the answers to the top financial questions from seniors. Many of these queries concern investment funds previously depended upon to support them in their retirement, now seriously jeopardized by market drops. Furthermore, the economic quandary delivers a double blow to seniors in the fact that hard-hit employers are having to resort to layoffs, a development that disproportionately affects older individuals as companies aim to push out the most expensive employees (who tend to be the oldest). Aged workers are also often viewed as having more difficulty adapting to new technology and changes in responsibilities. As a result, even those older adults who want to delay retirement are sometimes forced into it.

So what can older members of the workforce do? First and foremost, if possible, they should keep working. If doing so at their current job is not an option, there are still a number of alternatives to full retirement. Other New York Times articles highlight the growing number of aged individuals who go back to school for alternate and advanced degrees (the number of graduate students older than 50 "grew by 38 percent between 2001 and 2005, according to the National Center for Education Statistics"), as well as some who leave more competitive fields for second careers involving personally meaningful work. Those wishing to embark on their "second act" have a number of resources to turn to, including job search websites aimed at older job seekers such as SeniorJobBank.org and RetiredBrains.com. RetirementJobs.com (pictured at left), for example, lists a number of their "certified age friendly companies," from Macy's to Safeway to Wells Fargo. Although it is clear that the provisions of Social Security will have to be reformed in a major way by the federal government, it is imperative that individuals incorporate change into their retirement plans now. This is especially necessary given the present economy. While this may be an emotional as well as a financial adjustment for some, a fiscally secure retirement is well worth it.

2 comments:

Cam Siemer said...

Very nice post! First off, I would just like to say that I really like the title of your entry, "Rethinking Retirement." It's simple and catchy, and sparks the interest of the reader right away. You then follow up with informed, sophisticated language that demands the reader's full attention. After I read the first two colorful sentences I was hooked. I also appreciate the timeliness of your post. You appropriately address the current economic climate, as it directly affects this very important issue that more people should be aware of. Furthermore, you supply a good number of relevant links that supplement the content of your own entry well. The first image of the life expectancy graph also adds to the strength your argument. I really like that you state your own opinion that "the retirement age should be extended, if not at the policy level then at least at the personal level for now." You follow up nicely in the end by presenting suggestions as to what older members of the workforce can do for the time being.

One thing that might improve your post even more would be to elaborate on the opinions of the people who "may feel it unfair to be told to put a few extra years in." Pitting their arguments against your own might make for a more exciting and convincing discussion of the issue. Also, I believe I noticed one grammatical error in the sentence "The article also features several individuals who are now preparing to put off retirement for as many as ten years had originally planned." Do you mean to say "...ten years after they had originally planned?" Or you could just cut out "had originally planned" entirely. My final critique concerns the second graphic in your post. Perhaps cropping out the extra white space surrounding the main body of the website's main page would make for a larger and more easily readable image, allowing readers to get more of a hint of the site before clicking on the link. Anyways, criticisms aside, I quite enjoyed your post overall. Keep up the good work!

Nicolette Toussaint said...

Hi Katie. Well since you mentioned me, maybe you'd like to interview me for your next post. What was quoted in the Times was just the tip of the iceberg as the reporter conflated a couple things. I had told him that I hoped to work in my current industry (higher ed) for 5-7 years, and hoped to stop working FULL TIME at around 68. Currently, I work full-time, attend school, and work weekends at starting my interior design business. Thus, I work 7 days a week! I also figure that given finances, I now will need to work FULL TIME until well into my 70's. I hope that by the time I'm hitting my 80's, I can work part-time. I don't really see much realistic hope of retiring in the sense of NOT having to work.
-Nicolette Toussaint

 
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License.